Friendly fraud saw an increase when eCommerce became the most popular form of shopping. This current shopping trend gives consumers access to easy and quick service. Not to mention, it helps merchants reach a wider audience that physical storefronts doesn’t allow. However,better consumer experiences comes with side effects such as friendly fraud.
Fraud costs banks, businesses, and customers billions of dollars. Fraudsters come up with new ways to hack their way to cardholder and bank account information. Most businesses may not be aware that fraudsters can also look like customers.
Friendly fraud comes from invalid customer disputes. These customers are not victims of fraudsters and are instead targetting merchants. This may look like a customer claiming they never received an item that they actually had.
Other instances of friendly fraud include:
- Claiming damage that doesn’t exist
- Claiming a product was misrepresented when it was not
- Children purchasing through games and devices
- Disputing recurring subscriptions
- Claiming a purchase was unauthorized
- Not recognizing a billing descriptor and disputing
- Filing a dispute before contacting the merchant first
In dispute resolution, merchants are at a disadvantage. Filing customers are more likely to win disputes against merchants. This then costs businesses more than the lost product and cost – chargeback fees and other losses also come into play. Businesses and their acquiring bank work together to submit evidence that some customers are committing friendly fraud.
The rise in friendly fraud costs businesses, banks, and credit card providers time and money. The Merchant Advisory Group (MAG) and the Merchant Risk Council (MRC) advocate for businesses, especially in the realm of fighting fraud. They provide resources for businesses as well as helping improve payment experiences.
Visa is addressing friendly fraud concerns by partnering with the MAG and MRC in creating a better dispute program for merchants. This upcoming change will allow merchants to submit additional evidence during the dispute resolution process.
This advancement by Visa intends to cut down friendly fraud drastically by giving businesses more power in fighting chargebacks.